Telecoms.com

interview

Incumbent Thinking

Sean Williams, group strategy director at BT Group, and keynote speaker at the Broadband World Forum in September, gives Telecoms.com an overview of the UK incumbent’s comprehensive broadband deployments strategy.

At what stage are your fixed broadband upgrade plans?

We’re effectively rolling our three network deployments in the UK. The one we talk about most is our fibre network, where we’re spending £2.5bn over five years to cover two-thirds of the UK. We have already passed five million premises this summer, and we expect to pass ten million by next summer. So we’re rolling out at five million a year – a very, fast growth that I think is one of the fastest deployments that we can identify.

At the same time we’re also rolling out our ADSL2+ broadband network and we’re expecting to get to 80 per cent of UK premises covered by the end of this calendar year, and then 90 per cent of premises covered by the spring of 2013.

The third one, not to be forgotten, is that we are also rolling out Ethernet networks at the same time. And we already have 1,000 Ethernet nodes. This is the largest [Ethernet] network in the UK for the larger business customers and offers speeds from 1Mb up to 10Gb. And as we deploy fibre, ADSL2+ and Ethernet we get some synergy benefits from deploying them all at the same time.

We are also continuing to deploy overseas. We have a few city fibre networks that we continue to build out, so we are deploying an enormous amount of network. In fact, we make a capital investment of £2.5bn a year; quite a large amount of money and certainly more than other UK fixed telcos.

Can you tell us more about your fibre network?

Most of it is Fibre-to-the-Cabinet. We’re using Fibre-to-the-Premises only where it is more appropriate to use, which is firstly for lines where there are no cabinets, or for lines that have long copper from the cabinet. We also plan to use it where from a network and value perspective it is more commercially attractive to deploy. We expect it to be a quarter of our overall deployment.

How would you characterise the technology choices that BT has made for its fibre roll-out?

It seems to me that there are three relevant technologies to consider: Fibre-to-the-Cabinet, Fibre-to-the-Premises and cable broadband.

We are very optimistic about the capabilities of our Fibre-to-the-Cabinet network. Most customers get very good speeds up into the high thirties, and a bigger proportion of them get close to that speed than on copper broadband – there’s less variability. But the second one is that we are taking forward changes to the network that would allow us to achieve nearly double those speeds in the next 12-18 months. We’re expecting to be able to achieve 70-80Mb, which is great news. We’re very happy with that and it’s a long way ahead of what customers will likely in the future require.

Fibre-to-the-Premises clearly has a lot of capability. We expect to provide 100Mb and we are trialling speeds of up to 1Gb and we’re very positive about our ability to deploy this.

But what’s important is not just headline download speed – it’s also about the balance between download and upload. And our view is that FTTC and FTTP are capable of delivering much better overall performance than cable broadband, especially for upload.

Because actually, the upload speed becomes an increasingly important part of how people use the technology and the two-way information flow for more cloud-centric applications and two-way video.

We are really quite confident that our fibre products are going to outperform cable and we believe that FTTC will be able to deliver more than 100Mb within the foreseeable future. We do not really see consumer, residential applications that are going to require more than that even when [customers] are consuming multiple HD video streams, gaming, video calling, and internet surfing all at the same time, across a sizable household. We think that the capabilities of FTTC will be more than adequate for that.

Do you feel pressure from competitors or regulators to speed up the deployment?

Yes, in a sense. There is pressure particularly from government to speed up deployment. But we can be very proud of the fact that I think that ours is a very rapid deployment. We can’t identify another company that’s doing it faster, and without any public funding or regulatory favouritism. No doubt though there is pressure to do more and where public money is available we are happy to use that to roll out further and faster.

We have a brilliant example of that at the moment. One is in Northern Ireland, where in partnership with the Department of Enterprise, Trade & Investment there we’ve got already 85 per cent of business covered and we’re on track to extend that further so that 89 per cent of lines in Northern Ireland will be connected to a fibre-enabled cabinet by next spring. So it’s an example of where, with a bit of public money, we’re able to go much further, much faster.

Do you think there is a good business opportunity to charge end-users more for fibre access?

In reality we are pricing our fibre broadband at the same level as our copper. So the headline price of Infinity is basically the same. We don’t have a problem at all and in fact we’ve made the choice for customers a ‘no brainer’. If you can get fibre, why would you not want it? That’s because we have deliberately taken a pricing strategy that is designed to encourage people to take our fibre product in volume. That’s because volume of customers is critical to the business plan. We’re less worried about that pricing than we are about the volume because you’ve made a large fixed investment to set-up and deploy the network the cost of adding a new customer is relatively small, so you want to get as many customers as you can. So we’ve taken a very proactive approach with our pricing and that’s been very successful. We have now over 200,000 end users and 45 different providers using the product and re-selling it.

We are also very pro-active about getting other communications providers to our fibre network, which I think is quite unusual. But we want to get as many people as possible onto our network.

What social or economic benefits will your upgraded broadband services bring?

We do take a view that it has a big contribution to make towards competitiveness, economic stimulus and social inclusion in various parts of the country. If you are a small to medium-sized enterprise based outside a major conurbation and you’re reliant on broadband as your connection to the world, your market and your customers, then getting access to fibre means you’re as well connected as you would be as if you were in the city centre. So I think it will have real stimulus to business in local communities and therefore help economic activity migrate out of cities again and back to rural areas.

It also brings access to public services as well. For that, there has to be good online connections for everybody and we can deliver that. On the other hand, there needs to be highly effective online public services, which is the responsibility of the government, so forgive me for being a little bit more sceptical on that one.

Speaking of government, to what extent do you feel it should be involved in the roll out of broadband?

In the circumstances where you have people beyond the reach of commercial deployment I think there is a good case for government money to support the roll out. In this country [the UK] I think we’re not doing too badly.

As you know, the government has made over £830m available and Broadband Delivery UK is responsible for making that happen and we are happy to see that and to try and work with them. What’s really important is that the money is well targeted. I can’t answer if it’s enough money but what I think is that what is important is that the money gets out there and that there are tenders [for companies] to deploy the networks.

There are various ways of deploying public money in this field and I think the UK government is taking a very sensible approach as there are some approaches, such as the NBN in Australia, that in my view are not appropriate at all.

Can you expand on the thinking behind that opinion?

Essentially, because it is expensive and it risks [technology] redundancy. A lot of money is being spent to buy out copper assets that actually might have a life in the future, and replace it with fibre. So I think a more targeted scheme where you are actually giving money to a fibre deployment in areas where it is just beyond the commercial footprint is a more sensible approach.

To what extent do you see mobile broadband and fixed-line wireless competing with fixed broadband?

We are very interested in wireless broadband access solutions and we think they will have a role to play in the deployment to remote rural areas. However, we think that fixed wire-line will, for the foreseeable future, be a performance leader over wireless from the point of view of capacity, speed, latency and reliability. That said we do recognise that in some deployments it’s much more cost effective to go for a wireless solution. It might be LTE, or it might be using TV white space or satellite. But we think it’s really complementary to fixed wire-line solutions.

Do you think that large OTT players that are global internet traffic drivers, such as (Google and Facebook), should contribute to the costs of the networks that they soak?

My feeling is that broadband networks have traditionally been paid for by subscribers. That’s the traditional model, and I don’t really see what the problem with that it. I don’t see any market failure. I don’t think subscribers will be unwilling to pay for the investment required to provide them with the kind of broadband services that they want.

However, I think there’s a commercial opportunity for network providers to offer content providers services that they would be willing to pay for. I have no problem providing a quality assured delivery of content over our network to end users. It seems to me a perfectly ordinary commercial opportunity. However, I think the majority of network investment will be paid for by the end users and subscribers as it always has been.

There is then the question of network neutrality, and I think it’s really important to put some clarity on the debate. There are two questions. One is whether it’s appropriate to treat types of traffic differently and the second is whether it’s appropriate to treat different sources of content, differently. For me, the debate about net neutrality is about the second of those; which is to say, would we as network providers ever discriminate between content or applications on the internet or otherwise impede them, such as Skype, or TV content? And we would say that we would not do that and we never have done. That’s the difference with mobile operators, who typically block services that might compete with say, their voice subscription.

The other dimension is would we differentiate between different types of traffic – and the answer to that is yes we definitely will. And by that I mean is that for traffic that requires real-time packets, such as video conferencing, will be prioritised over other types of traffic to optimise customer experience.

There is no network built anywhere that has sufficient capacity for peak traffic at all times so we will always have to manage traffic. But neither of those things is at odds with getting open access to the network.

How would you characterise BT’s biggest challenges over the next 12-18 months?

We have a lot of network to deploy very rapidly over the next 12-18 months. I think we are completely on top of that, but it’s always a challenge. Finding engineering solutions for continuing the deployment of FTTP is going to be one of our issues.

The second challenge is just a commercial challenge. We need to get customers on the network, we need to get penetration levels up to those we had in mind in the business case. It’s still early days but we remain confident about achieving that.

Sean Williams, group strategy director at BT Group, and keynote speaker at the Broadband World Forum is September, gives Telecoms.com an overview of the British incumbent’s comprehensive broadband deployments strategy.

At what stage are your comprehensive fixed broadband upgrade plans?

We’re effectively rolling our three network deployments in the UK. The one we talk about most is our fibre network, where we’re spending £2.5bn over five years to cover two-thirds of the UK. We have already passed five million premises this summer, and we expect to pass 10 million by next summer. So we’re rolling out at five million a year – a very, large fast growth that I think is one of the fastest deployments that we can identify.

At the same time we’re also rolling out our ADSL2+ broadband network and we’re expecting to get to 80 per cent of UK premises covered by the end of this calendar year, and then 90 per cent of premises covered by the spring of 2013.

The third one, not to be forgotten, is that we are also rolling out Ethernet networks at the same time. And we already have 1,000 Ethernet nodes. This is the largest [Ethernet] network in the UK for the larger business customers and offers speeds from 1Mb up to 10Gb. And as we deploy fibre, ADSL2+ and Ethernet we get some synergy benefits from deploying them all at the same time.

We are also continuing to deploy overseas. We have a few city fibre networks that we continue to build out, so we are deploying an enormous amount of network. In fact, we make a capital investment of £2.5bn a year; quite a large amount of money and certainly more than other UK fixed telcos.

Can you tell us more about your fibre network?

Most of it is Fibre-to-the-Cabinet. We’re using Fibre-to-the-Premises only where it is more appropriate to use, which is firstly for lines where there are no cabinets, or for lines that have long copper from the cabinet. We also plan to use it where from a network and value perspective it is more commercially attractive to deploy. We expect it to be a quarter of our overall deployment.

How would you characterise the technology choices that BT has made for its fibre roll-out?

It seems to me that there are three relevant technologies to consider: Fibre-to-the-Cabinet, Fibre-to-the-Premises and cable broadband.

We are very optimistic about the capabilities of our Fibre-to-the-Cabinet network. Most customers get very good speeds up into the high thirties, and a bigger proportion of them get close to that speed than on copper broadband – there’s less variability. But the second one is that we are taking forward changes to the network that would allow us to achieve nearly double those speeds in the next 12-18 months. We’re expecting to be able to achieve 70-80Mb, which is great news. We’re very happy with that and it’s a long way ahead of what customers will likely in the future require.

Fibre-to-the-Premises clearly has a lot of capability. We expect to provide 100Mb and we are trialling speeds of up to 1Gb and we’re very positive about our ability to deploy this.

But what’s important is not just headline download speed – it’s also about the balance between download and upload. And our view is that FTTC and FTTP are capable of delivering much better overall performance than cable broadband, especially for upload.

Because actually, the upload speed becomes an increasingly important part of how people use the technology and the two-way information flow for more cloud-centric applications and two-way video.

We are really quite confident that our fibre products are going to outperform cable and we believe that FTTC will be able to deliver more than 100Mb within the foreseeable future. We do not really see consumer, residential applications that are going to require more than that even when [customers] are consuming multiple HD video streams, gaming, video calling, and internet surfing all at the same time, across a sizable household. We think that the capabilities of FTTC will be more than adequate for that.

Do you feel pressure from competitors or regulators to speed up the deployment?

Yes, in a sense. There is pressure particularly from government to speed up deployment. But we can be very proud of the fact that I think that ours is a very rapid deployment. We can’t identify another company that’s doing it faster, and without any public funding or regulatory favouritism. No doubt though there is pressure to do more and where public money is available we are happy to use that to roll out further and faster.

We have a brilliant example of that at the moment. One is in Northern Ireland, where in partnership with the Department of Enterprise, Trade & Investment there we’ve got already 85 per cent of business covered and we’re on track to extend that further so that 89 per cent of lines in Northern Ireland will be connected to a fibre-enabled cabinet by next spring. So it’s an example of where, with a bit of public money, we’re able to go much further, much faster.

Do you think there is a good business opportunity to charge end-users more for fibre access?

In reality we are pricing our fibre broadband at the same level as our copper. So the headline price of Infinity is basically the same. We don’t have a problem at all and in fact we’ve made the choice for customers a ‘no brainer’. If you can get fibre, why would you not want it? That’s because we have deliberately taken a pricing strategy that is designed to encourage people to take our fibre product in volume. That’s because volume of customers is critical to the business plan. We’re less worried about that pricing than we are about the volume because you’ve made a large fixed investment to set-up and deploy the network the cost of adding a new customer is relatively small, so you want to get as many customers as you can. So we’ve taken a very proactive approach with our pricing and that’s been very successful. We have now over 200,000 end users and 45 different providers using the product and re-selling it.

We are also very pro-active about getting other communications providers to our fibre network, which I think is quite unusual. But we want to get as many people as possible onto our network.

What social or economic benefits will your upgraded broadband services bring?

We do take a view that it has a big contribution to make towards competitiveness, economic stimulus and social inclusion in various parts of the country. If you are a small to medium-sized enterprise based outside a major conurbation and you’re reliant on broadband as your connection to the world, your market and your customers, then getting access to fibre means you’re as well connected as you would be as if you were in the city centre. So I think it will have real stimulus to business in local communities and therefore help economic activity migrate out of cities again and back to rural areas.

It also brings access to public services as well. For that, there has to be good online connections for everybody and we can deliver that. On the other hand, there needs to be highly effective online public services, which is the responsibility of the government, so forgive me for being a little bit more sceptical on that one.

Speaking of government, to what extent do you feel it should be involved in the roll out of broadband?

In the circumstances where you have people beyond the reach of commercial deployment I think there is a good case for government money to support the roll out. In this country [the UK] I think we’re not doing too badly.

As you know, the government has made over £830m available and Broadband Delivery UK is responsible for making that happen and we are happy to see that and to try and work with them. What’s really important is that the money is well targeted. I can’t answer if it’s enough money but what I think is that what is important is that the money gets out there and that there are tenders [for companies] to deploy the networks.

There are various ways of deploying public money in this field and I think the UK government is taking a very sensible approach as there are some approaches, such as the NBN in Australia, that in my view are not appropriate at all.

Can you expand on your thinking behind that opinion?

Essentially, because it is expensive and it risks [technology] redundancy. A lot of money is being spent to buy out copper assets that actually might have a life in the future, and replace it with fibre. So I think a more targeted scheme where you are actually giving money to a fibre deployment in areas where it is just beyond the commercial footprint is a more sensible approach.

To what extent do you see mobile broadband and fixed-line wireless competing with fixed broadband?

We are very interested in wireless broadband access solutions and we think they will have a role to play in the deployment to remote rural areas. However, we think that fixed wire-line will, for the foreseeable future, be a performance leader over wireless from the point of view of capacity, speed, latency and reliability. That said we do recognise that in some deployments it’s much more cost effective to go for a wireless solution. It might be LTE, or it might be using TV white space or satellite. But we think it’s really complementary to fixed wire-line solutions.

Do you think that large OTT players that are global internet traffic drivers, such as (Google and Facebook), should contribute to the costs of the networks that they soak?

My feeling is that broadband networks have traditionally been paid for by subscribers. That’s the traditional model, and I don’t really see what the problem with that it. I don’t see any market failure. I don’t think subscribers will be unwilling to pay for the investment required to provide them with the kind of broadband services that they want

However, I think there’s a commercial opportunity for network providers to offer content providers services that they would be willing to pay for. I have no problem providing a quality assured delivery of content over our network to end users. It seems to me a perfectly ordinary commercial opportunity. However, I think the majority of network investment will be paid for by the end users and subscribers as it always has been.

There is then the question of network neutrality, and I think it’s really important to put some clarity on the debate. There are two questions. One is whether it’s appropriate to treat types of traffic differently and the second is whether it’s appropriate to treat different sources of content, differently. For me, the debate about net neutrality is about the second of those; which is to say, would we as network providers ever discriminate between content or applications on the internet or otherwise impede them, such as Skype, or TV content? And we would say that we would not do that and we never have done. That’s the difference with mobile operators, who typically block services that might compete with say, their voice subscription.

The other dimension is would we differentiate between different types of traffic – and the answer to that is yes we definitely will. And by that I mean is that for traffic that requires real-time packets, such as video conferencing, will be prioritised over other types of traffic to optimise customer experience.

There is no network built anywhere that has sufficient capacity for peak traffic at all times so we will always have to manage traffic. But neither of those things is at odds with getting open access to the network.

How would you characterise BT’s biggest challenges over the next 12-18 months?

We have a lot of network to deploy very rapidly over the next 12-18 months.I think we are completely on top of that, but it’s always a challenge. Finding engineering solutions for continuing the deployment of FTTP is going to be one of our issues.

The second challenge is just a commercial challenge. We need to get customers on the network, we need to get penetration levels up to those we had in mind in the business case. It’s still early days but we remain confident about achieving that.

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